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Daily Economic Update
17.08.2025Saudi Arabia: Inflation eased to five-month low in July. Inflation fell to a five-month low of 2.1% y/y in July from 2.3% the previous month. The deceleration was mostly thanks to a continued decline in housing inflation which eased to 5.6% y/y, the lowest since November 2022, helped by a drop in housing rents to 6.6%. Also contributing to the lower reading was the softer inflation in restaurants & hotels (1.4% from 1.6%) and education (1.1% from 1.4%). This more than offset the higher inflation in several other items including food & beverages ( 1.6% from 1.5%), recreation and culture (0.7% from -0.9%) and miscellaneous goods & services (4.3% from 4.1%), and slower deflation in transport (-0.3% from -0.7%) and clothing & footwear (-0.4%). Inflation is expected to remain steady at current levels as rising inflation or slower deflation in most categories, driven by solid domestic demand and rising input costs, is curbed by the trend of easing housing inflation which is expected to continue.
UAE: Dubai’s economic growth speeds up in Q1 2025 to 4%. Dubai’s GDP expanded by 4% y/y in Q1 2025, accelerating from the 3.5% recorded in the previous quarter, according to the latest official figures. Output gains were broad-based, but the health & social work sector logged the most robust growth (26% y/y), followed by the real estate (7.8%) and finance & insurance sectors (5.9%). The figures build on the strong progress recorded in 2024, when the economy expanded by 3.2% on the back of gains in the trade, financial services, real estate and transport sectors especially. Also published before the weekend was Dubai’s CPI inflation data for July, which showed the headline rate quickening to 2.9% from 2.4% in June (+0.4% m/m). Increases in the cost of housing & utilities were the primary impulse (6.4% y/y), though these continue to moderate. The rate of deflation in the transport sector, meanwhile, continued to slow (-3.4% from -7.4% in June).
US: Mixed consumer data show continued uncertainty about the economic outlook, while inflation concerns rise. US retail sales in July increased by a robust 0.5% m/m (3.9% y/y), matching the consensus forecast, from an upwardly revised 0.9% (4.4% y/y) rise in June. A narrower measure of sales (excluding auto, gasoline stores, food services and building materials) also rose 0.5% m/m following June’s revised increase of 0.8%, underscoring solid household spending at the start of Q3. However, somewhat dampening the mood, the University of Michigan consumer sentiment index unexpectedly weakened in August to a three-month low of 58.6 from 61.7 in July on rising worries about deteriorating job prospects and the inflation outlook. This underlines that the lack of clarity on tariffs and other policies may continue to impact household demand, a trend seen since the beginning of the year. Meanwhile, the survey also showed consumer inflation expectations rising to 4.9% y/y and 3.9% from 4.5% and 3.4% in July for the next-year and five-year horizons, respectively. Further, in signs of strengthening pipeline price pressures, PPI inflation accelerated by more than expected to 0.9% m/m (3.3% y/y) in July from zero m/m (2.4% y/y) in June, the highest since March 2022, contributed by higher margins for wholesalers and retailers. A core measure of PPI inflation (excluding food, energy, and trade services) also increased to 0.6% m/m from zero in June, amplifying concerns about tariffs’ impact on overall price rises in the coming months as businesses increasingly look to pass through higher import duties to consumers. Previously reported CPI inflation data showed sharp increases in prices for certain consumer goods despite the headline rate being relatively mild at 0.2% m/m. Although a 25-bps interest rate cut at the Fed’s next meeting is mostly priced in, markets’ views about further cuts moderated, now seeing below 50% probability of two more moves by the end of the year versus a more than 50% chance on last Wednesday. Yields on 10Y USTs rose to their highest this month to 4.32% on Friday, up by around 10 bps over the last two days.
UK: Q2 GDP growth slows as the front-loading impact unwinds but still beats expectations. The UK economy grew 0.3% q/q (1.2% y/y) in Q2, slowing from 0.7% (1.3% y/y) growth in Q1 but still beat the consensus and the BoE forecast of 0.1% rise. The slowdown was widely expected as economic activities accelerated in Q1 ahead of the implementation of steep US tariffs and local stamp duty changes. With an unwinding of the trend, the contribution of net trade flatlined after contributing a 50% share in growth in Q1. Production output returned to decline (-0.3% q/q from +1.3% in Q1), with growth in services also slowing to 0.4% from 0.7% earlier, dragged down by the wholesale & retail trade sector. The economic outlook remains underwhelming amid a government fiscal consolidation drive and higher cost burdens for employers. Though importantly, GDP in June rebounded by a solid 0.4% m/m after two straight monthly declines of 0.1% each, further signaling stabilization in activity. This followed mixed labor market data previously, which showed the pace of job losses slowing to a six-month low in July.
Japan: GDP growth expanded more than expected in Q2, aided by resilient exports. Initial estimates showed GDP for Q2 2025 rising by 0.3% q/q, beating market expectations and coming above Q1 growth of 0.1%. The increase was helped by surprisingly resilient exports which rose by 2.0% q/q, up from a decline of -0.3% in the previous quarter, thanks to solid car shipments ahead of a US tariffs deadline (July 9) back then. On the other hand, import growth slowed to 0.6% q/q from 2.9% in Q1, pushing the contribution to growth of net external demand (exports minus imports) to 0.3% points. Private consumption, which constitutes more than half of Japan’s GDP, logged a 0.2% q/q rise, unchanged from Q1. While the Bank of Japan is expected to hold policy steady at the next policy meeting on September 19th, Governor Kazuo Ueda said last month that authorities will keep raising borrowing costs if they are confident that domestic demand can stay steady. Meanwhile, the government finalized guidelines for the FY2026 budget, granting ministries the authority to ask for up to 20% more funding than the FY2025 baseline for priority measures such as cost-of-living support and free high-school tuition with the process moving toward draft formulation by year-end.
China: Housing continues its slump as other economic indicators weaken. New home prices in China fell 2.8% y/y in July, extending a 25-month streak of declining prices as the country’s real estate market continues to struggle. Despite that, the y/y drop in new home prices softened for the ninth straight month, recording the smallest fall since March 2024 as local governments continue to ease buying restrictions and provide incentives for homebuyers. Elsewhere, industrial production growth also slowed to an 8-month low of 5.7% y/y, lower than consensus estimates of a 5.9% rise and June’s 6.8% figure. Similarly, July’s retail sales also disappointed after recording just a 3.7% y/y rise, falling well short of consensus expectations of a 4.6% increase. Finally, unemployment edged up to 5.2% (5.0% consensus) while youth unemployment fell to 14.5%.